Piper Jaffray downgrades Select Comfort (SCSS 25.06) to Market Perform from Outperform and lowers tgt to $25 from $28, based on disappointing Q3 same-store sales results and more specifically a shortfall in mattress unit volume in co-owned store

Piper Jaffray downgrades NetEase (NTES 16.80) to Market Perform from Outperform and lowers tgt to $19 from $27, based on slowing growth for top two selling MMO games, uncertain and limited game pipeline, in-game protest trends that continue to dampen demand, increased government intervention regarding Internet gameplay that is likely and slowing growth trends for Internet gaming in China

Piper Jaffray downgrades Shanda Interactive (SNDA 15.08) to Market Perform from Outperform and lowers tgt to $17 from $21, based on its top two selling MMO games experiencing product fatigue, dynamic and limited game pipeline, uncertainty regarding a shift in business model, competition and slowing growth trends for Internet gaming in China.

Merrill Lynch downgrades Seagate (STX 21.13) to Neutral from Buy

Prudential downgrades The Stanley Works (SWK 51.35) to Underweight from Neutral and lowers tgt to $44 from $50, based on lower organic growth and EPS reductions

Oppenheimer downgrades Digital River (DRIV 53.05) to Neutral from Buy, based on valuation, the Symantec deal extension is likely a short-term negative and believe there may be downside risk to current Q4 and Q107 estimates

European Pharma Sector raised to Overweight from Neutral at UBS

Europe Insurance stocks cut to Neutral from Overweight at UBS

JMP Securities notes that Brookfield Homes (BHS 30.90) reported 3Q06 EPS of $1.03, above their EPS estimate of $0.96. Firm says most of the upside came from a $3.5 mln benefit to SG&A ($0.08/sh.) due to option expense reversal, and they view the quarter as mixed

ThinkEquity notes that Evergreen Solar (ESLR 8.63) posted Q3 revenue of $36 mln, beating their estimate/Street by $2.3 mln and $5 mln, respectively, and inline EPS of ($0.08). Firm thinks higher silicon prices could dampen margins in 2007 and 1H08. They say a questionable timeframe on the additional "non-EverQ" 150MW capacity build-out makes the future somewhat cloudy. They say greater clarity into EverQ equity accounting method and additional EverQ revenue are positives that offset some near-term issues. Firm cuts their tgt to $10 from $13 given their somewhat cautious outlook on the company.

"It has always been the prerogative of children and half-wits to point out that the emperor has no clothes. But the half-wit remains a half-wit, and the emperor remains an emperor." -- Neil Gaiman

As the market continues its unrelenting move higher, the bears tell us that the market beast wears no clothes. Bulls and buyers are told that they are embracing an illusion of strength and acting out of fear of being left behind. There are problems out there that are obvious to anyone but the market refuses to acknowledge them and continues merrily along.

What the naysayers are missing is that even if there is no good reason for the market strength, the fact is that the market can do whatever it pleases. If it wants to continue to move higher it is going to do so and it doesn't much matter what any of us think about it. Either we get with the program or we will be squashed by the arrogance of a market that will do what it wants for as long as it wants. At some point things will shift and the unjustified nature of the move will suddenly be realized by the masses but trying to anticipate when that will occur is a difficult task. There are some issues out there such as the mix of earnings reports and the increasingly narrow support for the market move on the back of a smaller group of mega-caps but right now the market is not ready to embrace any negatives

Speaking of emperors, the FOMC is set to issue its proclamation on interest rates this afternoon at 2:15 p.m. EDT and that is likely to create volatility. The expectation is that there is unlikely to be any major changes in the current stance but the market is going to be hypersensitive to any change in language about inflation. We'll talk about that more later today. --------

The E.I.A. reports that crude oil inventories had a draw of 3.21 mln barrels (Bloomberg consensus is a build of 3.0 mln barrels); gasoline inventories had a draw of 2.76 mln barrels (Bloomberg consensus is a draw of 550K barrels); distillate inventories had a draw of 1.42 mln barrels (Bloomberg consensus is a draw of 1.5 mln barrels).